The CBA CDS price was stable at 113bps Friday and there was little change in our US and European proxies either:
Some are now mulling a peak in spreads, from Banking Day:
- Commonwealth Bank (rated AA-) and Bendigo and Adelaide Bank (rated A-) provided the issuance highlights in the domestic corporate bond market last week.
CBA completed its second benchmark-sized issue for the year, selling A$2 billion of 3.25 year floating-rate notes, priced at 98 basis points over bank bills. This is exactly the same pricing achieved by National Australia Bank in February, when it sold $2.25 billion of three-year FRNs.
The identical pricing achieved by the CBA with a term to maturity that is a quarter of a year longer, provides the first evidence that credit spreads may be starting to contract.
Bendigo and Adelaide completed its own benchmark-sized issue when it sold $650 million of five-year FRNs. The issue was priced at 146 bps over bank bills, which compares favourably with the 138 bps paid for five-year funds by Suncorp-Metway (rated A+) the week before.
Nevertheless, Bendigo commented on the increasing cost of wholesale funding and said that its program for the year was now complete.
Alas I don’t think so. If oil can rally until US shale kicks back in then, yes, we could see some more tightening. But with the failure of the OPEC deal that now looks very questionable. As well, iron ore is likely past its peak for the year so on both counts falling commodity prices will probably assert more pressure on global high yield debt spreads henceforth and that will flow through to banks.
Spreads are going to oscillate in an up trend all year but right now we’re more likely enjoying the lows not the highs.
